October 30, 2006 – “The United States is a damned country that deserves only to be cursed. It declares its own occupation of our lands legitimate, but brands our resistance as terrorist”- Ahmed Ibrahim, Libyan parliament deputy speaker, April 2006.
I opened this blog with that comment to illustrate that money and greed will many times take precedence over issues of national security or the democratic desires of people. This is a concept that is extremely difficult for many people to grasp, especially those that have fallen victim to the mass media’s snow job (no pun intended in regards to U.S. White House Press Secretary Tony Snow).
However, one only needs to look at the Security and Prosperity Partnership of North America, an agreement signed by U.S. President Bush, Mexico’s President Vicente Fox, and Canada’s PM Stephen Harper on March 23, 2005, in relative obscurity, to understand the truth of my above statement.
I have heard many people state that the discussion of politics has no place in the discussion forum of investments and the stock markets. While this should be true, it is not. And if you don’t understand the inseparable links between politics and the stock market, then in the end, your investment decisions will suffer. I guarantee you this.
The Security and Prosperity Partnership of North America has major, widespread implications for the future economic direction and national security of all three countries, even regarding the possible development of a single North American currency that would replace the peso, the U.S. dollar, and the Canadian dollar, yet it was not widely reported on by the mass media. Have you heard about it before? If not, then you prove my point.
But much more damning evidence of the fact that finance, and not governments, make the world go round is apparent when exploring the lead quote of this blog. In March, 2006, the U.S. government decided to keep the African nation of Libya on its official list of state sponsors of terrorism. Despite this, and despite Ibrahim’s inflammatory comment directed toward the U.S. government, the U.S. government still decided to restore full diplomatic relations with Libya just five months ago and remove Libya’s label as a state that sponsors terrorism.
In fact, given the frequent White House criticisms of Venezuelan President Hugo Chavez’s similarly colored inflammatory statements, how many of you remember hearing criticisms of Ibrahim’s statement? I read international news daily and while I come across dozens of stories about the U.S. rebuking Chavez I can’t recall a single story I encountered that criticized Ibrahim.
Why?
Libya has oil- lots of it – and they’ve been friendly to the desire of Western oil companies wishing to explore and develop in their country. Although Libya intelligence has cooperated with American intelligence in interrogating captives and providing information to capture terrorists, certainly another important impetus behind the restoration of diplomatic relation is undoubtedly the massive oil reserves that Libya possesses. Despite the fact that countries such as Nigeria are in the news far more frequently, Libya possesses the largest oil reserves of all African nations. And as soon as diplomatic relations were restored, every single major big oil company, American and European, was knocking on Libya’s door.
As you will know from my next blog entry which I will post in a day or two, after big oil finishes its current leg up, I much prefer shifting assets to auxiliary industries away from companies that directly explore and produce oil. However, investing in the right junior production companies will still be okay. One such company is the UK firm Soco International (Ticker: SIA.L on the London Stock Exchange).
Besides oil interests in Vietnam, Yemen, and Thailand, Soco International holds oil exploration interests in the Democratic Republic of Congo and in Libya in Africa. I purchased Soco International about four months ago because of the wildcards of the DRC and Libya. These are two countries that could potentially grant explosive growth to Soco in addition to its solid projects in Vietnam, Yemen and Thailand.
The DRC is transitioning into one of the more stable emerging nations after decades of corruption and volatile instability, and because of this, I like SOCO’s exposure to the DRC as well. Follow this link to read about elections in the Democratic Republic of Congo this week that a Reuter’s reporter called “the most important in Africa since a ballot in 1994 ended decades of apartheid repression in South Africa, the United Nations said on Saturday.”
I know that most people probably are unaware of the importance of the changing political and economic landscape in the DRC and the changing attitudes of the U.S. towards Libya, but as I said, my goal is to dig out opportunities that most likely will never make it to the mainstream media. I discovered both of these developments four months ago and as a result, invested in Soco.
However, realize that Soco is subject to more volatility and more geo-political risk because of its business strategy than blue chip oil companies and even other junior oil companies. However, there is also an “X” factor with this company that I have not discussed. I have reserved discussion of this “X” factor only for members of my maalamalama e-learning site that we will hopefully launch within the next month. This “X” factor helps mitigate much risk when investing in companies similar to Soco, and also exists for companies of all sizes. For example, telecomm giant Verizon is another company that has this “X” factor that I also like. Many of you that know me know that I recommended buying Verizon about six months ago due to this “X” factor. And even though Verizon has had a good run recently, I believe that due to the “X” factor, that it would still be a good stock to purchase on dips in the future.
So again, my strategy in investing in Africa for now largely consists of finding companies that are invested in some of the African nations that have potential for explosive growth such as the DRC and Libya, but yet have a wide enough portfolio of business outside of Africa to mitigate these riskier opportunities.
P.S. By the way, Lula has just secured re-election in Brazil.
[tags]Soco International, oil stocks, best free stock picks, investment strategies, Libya,Thailand,Vietnam,politics and stocks[/tags]
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J.S. Kim is the founder and Managing Director of maalamalama, a comprehensive online investment course that uses novel, proprietary advanced wealth planning techniques and the long tail of investing to identify low-risk, high-reward investment opportunities that seek to yield high double-digit or greater annual returns.
